Paxton expands business ties despite pledge to downsize them

By Lauren McGaughy, Austin Bureau

July 8, 2015

Photo: File Photo

Ken Paxton, Republican attorney general candidate in Texas.

Ken Paxton, Republican attorney general candidate in Texas.

AUSTIN — Despite promising last year to “wind down” his involvement in dozens of real estate and business ventures, Attorney General Ken Paxton continued to expand his holdings in 2014, according to personal financial documents.

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Paxton pledged during last year’s campaign to begin divesting from his sizable business portfolio and funnel these investments into a blind trust after his political opponents raised concerns about conflicts of interest.

During the decade he was in the state Legislature, Paxton’s holdings grew from two businesses and real estate investments to 28 last year. Among those was a Dallas-based computer company that has been investigated by the U.S. Securities and Exchange Commission for allegedly defrauding its investors.

Personal financial disclosure forms Paxton filed at the end of last month show he became involved in three new businesses in 2014.

“As we stated we would during the campaign, we organized a blind trust and placed appropriate assets into the trust,” Paxton spokesman Anthony Holm said in a statement Monday. He did not respond to further requests about which or how many interests Paxton had divested or placed in the trust. He also did not answer several questions about why the attorney general continued to increase his business interests in 2014 despite Holm’s assurances last October that Paxton was “trying to liquidate or wind down many of these investments.”

Paxton also did not disclose his involvement in one, Cherokee Children’s Camp LLC, on his filings for the last four years.

Holm said the attorney general did not need to include Cherokee in his filings.

“Concerning the Camp, my understanding is General Paxton has no interest in this entity nor has he ever; should an expanded filing be appropriate, then I expect our lawyer will do so.”

The Texas Secretary of State website lists Paxton as the president, secretary and treasurer of Cherokee Children’s Camp and Paxton’s residence as the principal place of business. Cherokee does not have a website or other online advertisement detailing what it is, but two business-related websites list it as a “women’s clothing store” in McKinney. Calls to the Robert Hultstrand of Frisco, who is listed as a “member” on Cherokee’s online documents, were not returned.

Asked how Paxton could have “no interest” in the camp, while acting as its president for multiple years, Holm said, “you can absolutely be president or treasurer or anything else of a business and have zero interest in it.”

“And remember, a lot of his legal background is organizing these type of entities,” added Holm. “So, that’s just not uncommon for him to be a board member of any of these groups.”

According to instructions in the Texas Ethics Commission website, those filing personal financial disclosure forms must list interests in any business entities, which are defined as “a sole proprietorship, partnership, firm, corporation, holding company, joint stock company, receivership, trust, or any other entity recognized by law through which business for profit is conducted.”

The forms also require individuals to list any board of directors or executive positions on for-profit and nonprofit entities. Paxton lists a dozen such positions on his financial disclosure form, including his position as director of Sacra Script Ministries, a Bible study group, and director of the Collin County Student Aviation Initiative.

Paxton invested in three additional entities in 2014. Individuals tied to these entities have given to Paxton’s campaign in the past three years.

In October 2014, Holm told the Chronicle, Paxton was “trying to liquidate or wind down many of these investments.” He added, “Most of what you’re referencing are property investments by the Senator and his family.”

Paxton lists Media Marketing MD as a new business interest on his personal financial disclosure form. The firm’s website says it “provides top-level website design and development” and Internet marketing services. CEO James Rothschiller, has given Paxton $1,350 since 2010, not including $250 from his wife Jill in March 2014.

Paxton also grew his investment in Sundance Memory Care, a chain of private care facilities for those suffering from the effects of Alzheimer’s disease and dementia. He previously invested in two Sundance facilities in Oak Hills and Wood Creek, and his 2014 investment included a third location.

Sundance President and CEO Matt Stanley gave $500 to Paxton’s campaign in the year he invested in the company.

Paxton listed KEP Acquisition Group, LLC as his third new business interest for 2014. John B. Jones, the chief executive of another LLC listed as a managing member of KEP Acquisition Group, gave Paxton $3,000 in 2012.

Andrew Wheat, research director with Texans for Public Justice, which has filed complaints against Paxton in the past, said the attorney general’s growing business ties are part of a concerning pattern.

“Every week there’s another revelation that comes out about his questionable securities and business relationships, and it’s just hard to believe that this man is going to last throughout the year as attorney general,” Wheat said. “I think as the state’s highest official lawman that it’s time for him to fall on his sword. This is not instilling public confidence in Texas law.”

On Tuesday, the Austin Bureau reported Paxton held stock in Servergy, a Dallas-based computer company the investigated by the SEC for possibly defrauding its investors. Paxton’s email address and last name appear in federal subpoenas issued to the company and a source familiar with the transaction told the Chronicle that Paxton at one time held at least 100,000 shares worth $1 each in the company. In 2013, a group of investors, which included former and current state lawmakers, sued Servergy to force it to produce a business plan and other related documents. The suit does not mention Paxton.

The attorney general’s Servergy link was revealed just as special prosecutors prepare to present a first-degree felony case to a grand jury in Collin County. Prosecutor Kent Schaffer last week said there was “substantial evidence” to prove Paxton violated state securities laws. Sources told the Chronicle in May that the probe into the attorney general turned up allegations of fraud in connection with how Paxton solicited clients, including several high-profile Republicans.